Amazon dropping Apple TV and Chromecast is understandable, but dumb

Amazon has told its marketplace resellers in an email that it will no longer be selling Google’s Chromecast streaming TV adapter or Apple’s new Apple TV device, claiming they aren’t compatible with its Prime Video service. This seems more than a little disingenuous, however. The main reason Amazon doesn’t want to sell them is that they are the company’s biggest competitors when it comes to streaming TV. But by trying to injure its opponents, Amazon could also wind up hurting itself.

In its email, Amazon said that because Prime Video had become a significant part of its business, “It’s important that the streaming media players we sell interact well with Prime Video in order to avoid customer confusion.” But this implication that its Google or Apple’s fault that their products don’t mix well with Prime Video is somewhere between a stretch and a fabrication.

Amazon (AMZN) can ensure that its service works with whatever products it wants to, simply by creating an app or integrating support for those devices. Google has a wide open development process that would make it child’s play for Prime Video to work with the Chromecast, and making the service work on Apple TV would be almost as easy, since Amazon already has Prime Video apps for the iPad and iPhone. Amazon is also apparently happy to keep selling the Roku, presumably because it isn’t a competitive threat.

The first response from some Amazon critics was to argue that its move is anti-competitive, and should raise antitrust concerns, but there’s little hope of that. The company is no different than Walmart or any other retailer, in the sense that it can choose to carry or not carry whatever products it wants. Striking out at Google (GOOG) and Apple may be childish, but it’s probably not illegal.

The rationale for Amazon’s move is pretty obvious: It has spent hundreds of millions of dollars building up Prime Video, including acquiring content like its award-winning showTransparent. It’s probably concerned that Apple’s new TV service could become a significant competitor, and Google’s Play is also a potential threat. Amazon may also be irritated that any transactions involving Prime Video that take place on Apple’s platforms require it to give the company a 30% cut.

Although Amazon makes a Fire TV stick (which is almost identical to the Chromecast) and other devices, content services like Prime Video are what it really cares about. Unlike Apple [fortune=stock symbol=”AAPL”], which makes the bulk of its revenue by selling devices — and therefore sees content primarily as a way of increasing demand for its hardware — Amazon is the exact opposite. It sees hardware like the Fire tablet, the Kindle and its other devices as being mostly a delivery vehicle for its content.

While the company’s move to cut off Google and Apple may be understandable, however, it is also probably unwise, at least in the long term. For one thing, Amazon has made a big deal out of being “the everything store,” a claim that is now clearly not the case in a couple of significant ways. It may see the value in trying to divert customers towards its own products, and keeping them within its own ecosystem of hardware and content (something Apple knows more than a little bit about), but that’s a different proposition than being a retailer who sells whatever customers might want.

A stupid and arrogant move by Amazon (I'm a small shareholder), halting sale of some streaming players. http://t.co/wHr7UvAuFd

Not carrying Chromecast and Apple TV isn’t going to harm either Google or Apple much, since they probably don’t rely on Amazon for a significant proportion of their sales. But it could harm Amazon’s brand if its customers lose trust in the company’s ability to provide what they are looking for.

And if what Amazon really wants is to increase demand for its Prime Video service, then why wouldn’t it make it as easy as possible for users to get access to that service through whatever device or alternate platform they are already using? Requiring them to use only Amazon products makes it a lot less likely that they are going to do so. The Chromecast and Apple TV decision feels more like a spiteful thumbing of the nose than it does a co-ordinated strategy, and that’s never a good reason to do something.